Volkswagen leans towards building new plant in Mexico vs. US for Audi

Volkswagen Group is favoring the construction of the North American assembly plant in Mexico for its luxury Audi brand rather than in a site at its Chattanooga manufacturing complex in the U.S., a source from VW revealed to Automotive News' sister publication Automobilwoche.

The new factory will be manufacturing the second-generation Audi Q5 SUV and is set to commence production in 2015. Chief Executive Officer Rupert Stadler at Audi has pushed for Mexico while the VW executives are leaning towards a U.S. site, Automobilwoche reported. The supervisory board at VW will meet on Wednesday to make a final decision.

A U.S.-based spokesperson for Audi related that the matter is now up for review by the board. He further stated that from that point, the matter can take "a lot of different directions." He explained that the supervisory boards at VW Group and Audi must approve the decision. The spokesperson did not disclose further details. Official at VW have constantly reiterated that a decision on the North American operations would be made this summer and publicly have weighed the cons and pros of Chattanooga and Mexico.

The Chattanooga factory is where the company manufactures the VW Passat. It is less than a year old, has plenty of room for expansion and is near a supply base.

Furthermore, VW Group's head of manufacturing Michael Macht said in February through Automotive News Europe that the "Made in U.S.A." label is vital to the automaker. Macht also said that Mexico has advantages and one of these is that the company can avoid the 10% duty levied on automobiles made in the United States and shipped to Europe. VW has a factory in Puebla, Mexico, where it manufactures the Jetta and Beetle.